Multi-Level Marketing (MLM) is a very popular business method. It relies on “distributors” who use the power of influence to purchase the products—and ultimately, to sign up as a distributor in their downline.
MLM companies continue to grow in popularity. The products and services they provide are endless: cosmetics, essential oils, weight loss shakes, health foods, kitchen gadgets, jewelry, wine, and more Most MLMs are in the Health & Wellness Industry; you can find a comprehensive list of all health-related MLM companies here.
Unfortunately, the Direct Sales and MLM business model is very troubling, because it causes tremendous financial, mental, emotional, and social damage (see my previous posts).
Today, I’m going to give examples of how Direct Sales and Multi-Level Marketing companies use the 6 Principles of Persuasion, and a Devil’s Advocate perspective to make sure you recognize and avoid predatory tactics.
My MLM Story
I decided to join my first Multi-Level Marketing company when I was just 19 years old. The woman who recruited me focused in on my “pain points”: the areas of my life where I was in need of relief and felt vulnerable. I was a busy, stressed-out college student who was introverted, living far from home, had few friends, and needed extra spending money.
Despite my best efforts to succeed, I found myself overwhelmed with the constant demands of promoting products, talking my fellow students into joining sales events, and buying an endless supply of products. My dorm room got swamped with boxes of unopened products. After just 8 months as an MLM sales rep, I finally called it quits.
Ever since this “failure,” I asked myself…
Where did things go wrong?
Why was I unable to succeed as an MLM sales rep?
You’ve probably heard examples of extremely successful Multi-Level Marketing stars on social media posts. Maybe you have been invited to have coffee with a clandestine MLM rep, or you’ve been talked into a bait-and-switch conversation that starts out as a long-lost friend but ends in a sales pitch about how the company has changed their lives.
The reality is that joining and MLM does not work for most people. The vast majority of sales reps who use this business model never make a substantial income; most of them get into tremendous debt. (Check out these Income Disclosures Statements for more detailed information).
Rather than understanding how dangerous MLM companies can be, I was told that my failure was all my fault. This is just one of the are sneaky messages that are built into every MLM company.
We are told, “If you fail, it’s because you didn’t try hard enough.”
One thing that most bothers me about Multi-Level Marketing (also known as Direct Sales) is how they tend to prey on those who are particularly vulnerable and already experiencing financial pressures.
Instead of providing a sustainable way to earn money and become self-sufficient, this model keeps reps stuck in a never-ending cycle of buying products and signing up other unsuspecting victims.
My self-doubt and sense of failure about my MLM experiences changed after I discovered the classic work of a psychologist named Robert Cialdini. He wrote a book called Influence: The Psychology of Persuasion, which has been quoted by a lot of modern marketing experts (sometimes without giving Dr. Cialdini the credit he’s due…).
In his book, Dr. Cialdini provides some scientific evidence of why we make decisions, and what makes us susceptible to being duped. Some of his stories are obviously dated since they take place in the 1960’s and 70’s, but I love the way he demonstrates the reasons we are convinced to do things.
Here is a summary of the 6 principles in Dr. Cialdini’s book:
- Reciprocity (desire to give when something is received)
- Commitment (desire to stay consistent with what you’ve already agreed to do)
- Social Proof (desire to follow what others do)
- Liking (desire to act the same as those who are similar to you)
- Authority (desire to trust “experts”), and
- Scarcity (desire to have something that is in limited quantity).
I will explain each of these principles as they relate to the tactics used by MLM and Direct Sales companies.
Let’s take a look at how Multi-Level Marketing companies use the power of Influence to persuade people into joining. For each of the six, I will provide a Devil’s Advocate View, which is a contrarian perspective in order to examine what is going on beneath the surface.
Principle 1: Reciprocity
Reciprocity means “mutual exchange.” It is a relationship that benefits both sides equally.
Generally, females tend to have a strong desire to equalize the imbalance in a relationship. When someone shares a gift or a favor, most women feel obligated to repay “in kind,” with something of equal value. If the gift is not repaid, they may sense there is an imbalance until the debt is repaid.
Reciprocity is often a useful tool in marketing. Although it can be a benign marketing tool, unscrupulous companies use it to take advantage of the kindness of others.
How MLMs use Reciprocity
Multi-level marketing companies use this giveaway tactic all the time; here are some examples:
- MLMs encourage reps to purchase sample items (which are quite expensive, by the way).
- Early on in the sales process, MLM reps often give potential buyers a “free” item as a hook, then follow up continuously until they agree to buy.
- When a sales target shows interest in a product, the rep often offers to give it to them at no charge (an act of unexpected goodwill), which creates a sense of obligation to purchase something of similar value to balance the scales.
- MLM reps are told they must connect with old friends and acquaintances and build social equity.
This involves showing sudden interest in the well-being of someone they haven’t spoken to in years, offering to “get together for coffee” for the purpose of sharing their business opportunity, and soliciting free advice in order to make a sale.
- MLM reps are encouraged to connect with people during a period of loss (illness, unemployment, legal problems, family member death, infant loss, etc.). They may offer to have a fundraiser in which their MLM products are sold, or where new people are asked to sign up to their team (both of which benefit the rep).
A Devil’s Advocate View of Reciprocity
Reciprocity can easily be used to harm people, but this influencing tactic can also be used for good. We all have a strong desire to repay even a small debt. Consider the impact of giving a gift to potential buyers (like the Pop-By item, which I explain here).
Principle 2: Commitment
This is a desire to maintain consistency in what you have already said or done.
Commitment is also known as Consistency, because it involves our basic need to follow through on the promises we make.
This influencing principle happens when we fulfill a public, written, and voluntary promise… sometimes one we’re not even aware we have made.
How MLMs use Commitment
- They get potential buyer to agree to do something small, like sharing something about themselves, scheduling a meeting, writing down their phone number, or meeting for coffee.
- They ask the prospect to talk about their challenges and problems. Then they use this information to follow up continuously until the prospect finally buys the product.
- They talk to the buyer about the dollar amount they want to earn, or how much they would spend if they wanted to solve their problem. This number is used to convince the prospect of how little the initial package costs, and how much more they will earn by becoming an MLM representative themselves.
- They repeat the prospect’s core values in order to gain their commitment.
A Devil’s Advocate View of Commitment
We tend to agree to meet with someone we trust. The danger is that our need for consistency can lead us to make uncomfortable decisions, even if we know it’s not the right thing to do. When this involves selling a product, it can turn into Transaction Avoidance Syndrome — a breakdown of the sales process in which the seller is unwilling to complete the purchase. You can read more about it in my 3-part series.
When a buyer is afraid they will be taken advantage of, their only recourse is to cancel the meeting, refuse to accept the offer, or say “No” to the sales pitch. Refusing to accept something can be very difficult, so a risk intelligent business owner will make sure that her or his buyer is never placed in a situation where they feel the pressure to buy.
Rather than taking advantage of your customer’s goodwill, make sure that you provide tangible value throughout your sales process.
Principle 3: Social Proof
This is the desire to follow what others do.
It is also known as Consensus.
How MLMs use Social Proof
- They encourage reps to pressure their friends and relatives to buy, based on the strength of that relationship.
- They convince a buyer to join based on decisions of their peers (“3 of your friends already signed up!”).
- They use the recommendations by “influencers” to encourage purchases from those who want the same kind of experience or lifestyle.
- They leverage horizontal power by targeting people who have similar needs or situations.
- They establish a (false) sense of community and collaboration, even if none exists outside of the MLM structure.
A Devil’s Advocate View of Social Proof
As humans, we make decisions with a pack mentality. When we see others who are similar to us doing something, we automatically think it could be a good idea for us, too. While this can be a great tool to influence your customers’ purchasing decisions, make sure you don’t “name drop” excessively (by making it seem like all of their friends use your service). This type of over-familiarity can be a real turn-off once a buyer realizes that you have misrepresented your closeness to their peers.
On the other hand, this technique works really well if it comes from your target customers directly. That’s why honest testimonials are so effective, as well as organic social media shares — when your best customers share how great your services are with their peers.
Principle 4: Liking
This happens when we want to be around people who are similar to us.
It is also known as Similarity
How MLMs use Liking/Similarity
- They create a friendship bond with potential customers by feigning a close relationship that may not actually be there.
- They encourage reps to find areas of shared interests, experiences, or lifestyle choices and to emphasize those in order to get closer to potential buyers.
- They tell reps to make positive remarks and stroke their ego of potential customers.
- They encourage reps to use their charm to win the sale.
- They say that customers are more likely to buy if the salesperson is constantly upbeat, enthusiastic, and shows off a lavish and desirable lifestyle.
A Devil’s Advocate View of Liking/Similarity
Although we may not like to admit it, we are drawn to people who match our socioeconomic status, our education level, intelligence, personality type, and lifestyle choices. Some of this is from social conditioning, and it’s important to be aware of whether our friendship group is too homogenous. “Groupthink” is quite common in MLMs, because everyone tends to say and make choices that align with the overall group rather than question whether it is appropriate.
As a business owner, make sure you seek opportunities to serve customers in a way that makes them feel comfortable. Consider whether your marketing efforts are targeted toward one singular socioeconomic group or type of person. While Niche Marketing is very effective, it can be skewed too far by denying legitimate buyers the opportunity to use your services, simply because they do not see themselves in the marketing message.
Principle 5: Authority
This is our innate belief that “experts” know better than we do.
How MLMs use Authority
- Their founder or top leaders are falsely portrayed as licensed healthcare practitioners (physicians, medical professionals, or other trained roles) even when they are actually not legitimate healers. (D. Gary Young of YoungLiving Oils was convicted for practicing without a medical license and for making false health claims).
- They use medical professionals to add credence to a product’s health claims.
- They get celebrity endorsements in order to add credibility.
- They tell reps to isolate a buyer’s problem (pain, loss of function, disability, or other fears) and promise that their product can solve it with no side effects—even if this is not scientifically proven or approved by the FDA.
- They wear a lab coat and stethoscope to appear more qualified to offer medical advice.
- They use scientific-sounding facts and figures to “wow” potential buyers with information.
A Devil’s Advocate View of Authority
Healthcare consumers are often confused by the vast amount of information that is floating around. They can find it very difficult to make an informed choice, especially when so many companies promote products and services that promise an immediate, pain-free cure.
The best way to establish your authority in a crowded healthcare market is to start by getting the proper qualifications to practice your craft. If you aren’t yet fully licensed or certified, don’t promote your services as if you do.
I encourage my clients to consider a very narrow practice focus, which could require additional training and certifications. By choosing a very distinct part of the market, you can offer a specialization that is authentic — rather than overextending a credential or knowledge base, which could lead to misrepresentation and dangerous outcomes for consumers.
Principle 6: Scarcity
Scarcity is the desire to have something that isn’t readily available.
When we perceive that something is of limited quantity, we feel compelled to participate… even if that item or situation isn’t something we need.
Think about how compelling these phrases are:
“This is an opportunity of a lifetime.”
“Quantities are limited!”
“Don’t miss out!”
“Tonight is the deadline!”
A limited quantity, combined with a deadline after which something won’t be available, is a very attractive combination that can be used effectively… either for good or for bad.
How MLMs use Scarcity
- Every Multi-Level Marketing company uses phrases such as
- “limited time offer,”
- “limited supply,”
- “act quickly before time runs out,”
- “limited edition,”
- “limited quantities,”
- “this offer ends tomorrow,” and
- “don’t miss out!”
- They often announce a “discontinued line” of products that “won’t be produced anymore!“
- They put limits on the availability of a product (LuLaRoe, for example, only produces a small quantity for each of their leggings design).
- They emphasize a limited number of spots available (“only 6 seats left!”).
- They promise a limited-time “gift with purchase,” or a bonus such as “$500 in free product” to tip the scales and get shoppers to buy.
- They also share “exclusive” information or “inside knowledge” that is not available unless buyers first make a commitment.
A Devil’s Advocate View of Scarcity
You can analyze this Influence method in three ways.
First, consider the fact that opportunities are often not as rare or limited as they are presented. The deadlines and “act now” announcements are almost always artificially engineered to pressure a buyer into making a purchase. Consider whether your business is using this tactic.
Secondly, identify times when you have felt a compulsion to purchase something because of the “Fear Of Missing Out.” The idea of not having something is often very uncomfortable, and can lead a buyer to want the product or service even if it’s not in their best interest.
Finally, look for signals that there is an artificial deadline or limitation, and call out the dishonesty. If you have used this technique to increase your sales conversions, consider asking buyers for feedback on their experience. Is it possible that you could make even more sales by eliminating the pushy sales tactic? While Scarcity can be really useful, it is important to use caution so you don’t pressure a potential buyer who may later regret their decision.
As you can see, we all have the ability to influence buyers into making choices that can add a lot of value to our business.
Consider how you can apply the 6 techniques listed above in a way that aligns with your philosophy, and also that creates a balance between taking too much (a Yang focus) and giving too much away (a Yin focus).
If you’d like to learn how to design a successful Niche Marketing Strategy for your business, check out my services.
Grace LaConte is a Strategic Niche Marketing Expert who helps healthcare practice owners to develop a high-profit specialization in a crowded market. Using her experience as a Risk Officer and Marketing Director for hospitals and IT services, Grace shares a refreshingly honest approach to uncover hidden risks and opportunities. Learn more at laconteconsulting.com, or connect with her on Twitter @lacontestrategy.